KEARNS & KEARNS
[2018] FamCA 32
•29 January 2018
FAMILY COURT OF AUSTRALIA
| KEARNS & KEARNS | [2018] FamCA 32 |
| FAMILY LAW – PROPERTY SETTLEMENT – just and equitable – Where both parties’ financial and non-financial contributions prior to and during the marriage were broadly equivalent – Where the parties benefitted from financial and non-financial assistance given to them by the maternal family – Where the youngest child lives with the husband – Where the husband is entitled to an extra adjustment on account of future needs – Concluded the husband’s overall entitlement to property and superannuation is assessed at 56.5 per cent and the wife’s entitlement at 43.5 per cent – Ordered the wife to retain the family home subject to payment to the husband – Ordered the husband to retain the holiday home – Ordered the parties to retain their own superannuation interests FAMILY LAW – COSTS – Where one main purpose of the Family Law Rules is to ensure each case is resolved in a just and timely manner at reasonable cost to the parties and the Court – Where the parties spent the equivalent of 27.5 per cent of their assets on legal costs in the litigation – Where legal costs must be proportionate to the relief reasonably expected from the litigation – Ordered costs be reserved for 28 days |
| Crimes Act 1900 (NSW) s 316 Evidence Act 1995 (Cth) s 191 Family Law Act 1975 (Cth) ss 48, 75, 79, 97 Family Law Rules 2004 (Cth) rr 1.04, 1.06, 1.07, 1.08, 15.41, 19.04 |
| Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 Baranski & Baranski [2012] FamCAFC 18 Bennett Ltd (1934) 52 WN (NSW) 8 Bevan & Bevan (2013) 49 Fam LR 387 Bishop & Bishop (2013) FLC 93-553 Bonnici & Bonnici (1992) FLC 92-272 Chorn v Hopkins (2004) FLC 93-204 Kessey & Kessey (1994) FLC 92-495 Marriage of Coghlan (2005) 33 Fam LR 414 Marriage of Kennon (1997) 22 Fam LR 1 McPhee v S Bennett Ltd (1934) 52 WN (NSW) 8 Omacini v Omacini (2005) 33 Fam LR 134 Stanford v Stanford (2012) 247 CLR 108 |
| APPLICANT: | Mr Kearns |
| RESPONDENT: | Ms Kearns |
| FILE NUMBER: | SYC | 3082 | of | 2014 |
| DATE DELIVERED: | 29 January 2018 |
| PLACE DELIVERED: | Newcastle |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Austin J |
| HEARING DATE: | 4, 5, 6 & 7 December 2017 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Gould |
| SOLICITOR FOR THE APPLICANT: | Watts McCray |
| COUNSEL FOR THE RESPONDENT: | Mr Campton SC |
| SOLICITOR FOR THE RESPONDENT: | Cominos Family Lawyers |
Orders
The wife shall pay to the husband the sum of $518,801 within two months of the date hereof.
Subject to compliance with Order 1 hereof, and in consideration of that payment, the wife is declared the sole legal and beneficial owner (as between the parties) of the real property and improvements comprising Folio Identifier …, being the property more commonly known as B Street, Suburb C, NSW (“the property”), and the husband shall do all such things and sign all such documents as may be necessary to transfer all his right, title, and interest in the property to the wife contemporaneously with his receipt of payment pursuant to Order 1 hereof.
Subject to compliance with Order 2 hereof, and in consideration of that transfer, the wife shall indemnify the husband against all rates, taxes, statutory charges, and other outgoings and liabilities affecting or relating to the property.
In default of Order 1 hereof, the parties shall do all such acts and things and sign all such documents as may be necessary to list the property for sale by public auction on the following terms:
(a)The property shall be listed for auction sale within eight weeks of the date of default;
(b)The auctioneer, in the event of disagreement between the parties, shall be the auctioneer chosen by ballot from the respective choices of the parties;
(c)The reserve price shall be as agreed between the parties, and in the event of disagreement between the parties, the reserve price nominated by the auctioneer;
(d)In the event the property is not sold by auction, or private negotiation within a further seven days, then the property shall be submitted to successive auctions within further six weeks periods until sold, otherwise on the same terms and conditions as applied to the first auction;
(e)The parties are restrained from charging, mortgaging, or otherwise encumbering the property, save as to enable the wife’s compliance with Order 1 hereof.
Upon completion of the sale of the property pursuant to Order 4 hereof, the parties shall ensure the proceeds of sale are disbursed as follows:
(a)First, to pay all costs, commissions, and expenses of the sale and to pay any Council and water rates outstanding in respect of the property; and
(b)Second, to pay:
(i)The sum of $1,278,433 to the wife;
(ii)43.5 per cent of the remaining balance to the wife; and
(iii)The remainder to the husband.
The husband is declared the sole legal and beneficial owner (as between the parties) of the real property and improvements comprising Folio Identifier …, being the property more commonly known as E Street, D Town, NSW (“the holiday property”), and the wife shall do all such things and sign all such documents as may be necessary to transfer all her right, title, and interest in the holiday property to the husband.
Subject to compliance with Order 6 hereof, and in consideration of that transfer, the husband shall indemnify the wife against all rates, taxes, statutory charges, and other outgoings and liabilities affecting or relating to the holiday property.
Otherwise:
(a)Each party shall be the sole legal and beneficial owner (as between the parties) of all other real and personal assets in their respective registered ownership or possession as at the date of these orders and, for that purpose, bank accounts are deemed to be in the possession of the person named as the account holder and superannuation entitlements are deemed in the possession of the superannuant; and
(b)Each party shall be solely liable for and shall indemnify the other against any and all debts attaching or relating to their property and any debts in their respective sole names.
In the event of either party refusing or neglecting to sign within 7 days of a written request to do so any document necessary to implement the terms of the orders made under Part VIII, the Registrar of the Family Court of Australia at Sydney is empowered to execute such documents on behalf of the parties pursuant to s 106A of the Family Law Act.
Costs are reserved for 28 days.
Any and all other outstanding applications are dismissed.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Kearns & Kearns has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT NEWCASTLE |
FILE NUMBER: SYC 3082 of 2014
| Mr Kearns |
Applicant
And
| Ms Kearns |
Respondent
REASONS FOR JUDGMENT
Introduction
These proceedings concern the division of the parties’ property interests under Part VIII of the Family Law Act 1975 (Cth) (“the Act”).
After nearly 30 years of cohabitation and mutual hard work the parties’ net property and superannuation was worth about $3.6 million. There were relatively few issues to complicate the assessment of the parties’ respective entitlements to the property and superannuation, but they nevertheless held widely divergent views about their proportional entitlements.
The parties agreed the wife’s beneficial entitlement to a share of her late mother’s undistributed estate should be regarded as only a financial resource rather than as property. Given such agreement, the husband asserted his entitlement to the existing property and superannuation interests should be 70 per cent (with 30 per cent to the wife), whereas the wife asserted her entitlement should be 55 per cent (with 45 per cent to the husband). The 25 per cent differential equated to over $900,000.
More is said below about the parties’ disproportionate expenditure on legal costs in this litigation but, for introductory purposes, it is sufficient to observe that they spent nearly as much money on legal costs as the actual amount in contest between them. Little attention seems to have been paid to whether it was wise to continue spending so much money on the litigation and such lack of attention will likely be long regretted.
Short history
The parties married in 1985, when the husband was 21 and the wife 20 years of age.
Their three children were born in 1988, 1990, and 2001. At the time of trial, the two eldest children were adults and they continue to live with the wife in the former matrimonial home. The youngest child was 16 years of age and he lives with the husband, pursuant to orders made between the parties in May 2017 under Part VII of the Act.
The parties disputed whether they separated in February 2012, as the wife contended, or in November 2013, as the husband contended, but the dispute was arid for two reasons.
First, the husband deposed in the Initiating Application he filed in May 2014 that the parties finally separated in November 2013, which fact was not put in issue by the wife when she filed her first Response in June 2014, as was required if she disputed any of the foundational facts cited in his Application. Consequently, the wife was unable to resile from the agreed fact without leave (s 191 of the Evidence Act 1995 (Cth)), which was neither sought nor granted. She later alleged in the divorce application she filed in April 2015 that the parties finally separated in February 2012, but the husband disputed it. He consistently alleged in the divorce proceedings they separated in November 2013.[1] The factual dispute was not determined by the registrar in the divorce proceedings because, for the divorce to be granted, it was only necessary to be satisfied the parties were separated for a continuous period of not less than 12 months before the divorce application was filed (s 48(2)).
[1] Wife’s affidavit, para 100
Second, in any event, fixation of the date of the parties’ final separation did not influence the determination of the property settlement dispute. It was common ground that, whenever the intimacy of their marriage ebbed away, the parties lived in the former matrimonial home until about June 2014, when the husband and youngest child moved out. Their contributions within a common household up until that date, together with their contributions made in separate households thereafter, remain relevant to the outcome of the proceedings.
The husband commenced these proceedings in the Federal Circuit Court in May 2014, just before he vacated the former matrimonial home. The proceedings were listed for trial in that Court in May 2017 but, at trial, the parties agreed upon parenting orders in respect of the youngest child, after which the residual dispute under Part VIII of the Act was transferred to this Court for determination by trial in December 2017.
Evidence
The husband relied upon:
(a)His affidavit filed on 11 May 2017;
(b)His financial statement filed on 20 October 2017;
(c)The affidavit of his friend, Ms F, filed on 11 May 2017; and
(d)The affidavit of his friend, Mr G, filed on 30 June 2014.
The wife relied upon:
(a)Her affidavit filed on 10 May 2017;
(b)Her financial statement filed on 14 November 2017;
(c)The affidavit of the parties’ adult son, Mr H Kearns, filed on 10 May 2017;
(d)The affidavit of her friend, Ms J, filed on 10 May 2017;
(e)The two affidavits of her psychologist, Ms K, filed on 7 July 2014 and 18 April 2017; and
(f)The affidavit of her medical general practitioner, Dr L, filed on 12 May 2017.
No issue was taken with the wife’s reliance upon the evidence of her treating psychologist and doctor, even though it might have been contended the ambit of their evidence strayed beyond the limits permitted by Rule 15.41 of the Family Law Rules 2004 (Cth) (“the Rules”).
The wife also relied upon the oral evidence given by Mr M. She was ordered to file and serve an affidavit by that witness by a set date,[2] but was granted leave to adduce oral evidence from him as she was unable to procure his affidavit. The husband did not object. In evidence, Mr M adopted the correctness of a memorandum he recently prepared and he identified several other documents which related to the impending finalisation of the administration of the deceased estate of the wife’s mother.[3]
[2] Order 4 made on 28 June 2017
[3] Exhibits W3, W4
Legal Principles
Orders under s 79 of the Act altering the property interests of parties may only be made if the Court is first satisfied, pursuant to s 79(2), it is just and equitable to make such orders. The Act then identifies in s 79(4) the matters the Court must take into account in considering what order, if any, should be made (see Stanford v Stanford (2012) 247 CLR 108 at [22], [35]). While those two inquiries are not to be conflated (see Stanford at [35], [40], [51]), the factors within s 79(4) permissibly inform the inquiry under s 79(2) (see Bevan & Bevan (2013) 49 Fam LR 387 at [83]-[89], [163], [169], [171]-[172]).
It is necessary to begin consideration of whether it is just and equitable to make a property settlement order by identifying the existing legal and equitable property interests of the parties. It must not be assumed that the parties’ rights to or interests in marital property are or should be different from those that then exist or that a party has the right to have the parties’ property divided by reference to considerations set out in s 79(4) of the Act (see Stanford at [37]-[40], [50]). Commonly, however, it will be just and equitable for the parties’ property rights to be altered because the breakdown in their relationship will end their fiscal unity and deprive them of common use of their property (see Stanford at [42]; Bevan & Bevan at [68]-[70], [82], [164]-[165]).
If and once determined it is just and equitable for the property interests of the parties to be altered, the process of evaluating the proper orders to make is dictated by the factors enumerated within s 79(4) of the Act. The court must necessarily identify and assess the parties’ contributions within the meaning of ss 79(4)(a)-(c) and then take account of the relevant matters referred to in ss 79(4)(d)-(g) and 75(2).
Existing property interests
During final submissions, the parties jointly tendered an amended balance sheet to prove the identity and values of their property and superannuation interests,[4] which superseded an earlier version.[5] To the extent of any inconsistency evident between the contents of the amended balance sheet and other evidence adduced by the parties, in either their affidavits or financial statements, the evidence within the amended balance sheet was intended to prevail.
[4] Exhibit J2
[5] Exhibit J1
The husband’s existing assets, liabilities, and superannuation interests comprise:
No.
Assets
Value
Total
1
Former matrimonial home at Suburb C (50 per cent)
1,100,000
2
Holiday home at D Town (50 per cent)
270,000
10
Westpac acc #...78
3,615
11
1,050 Company O shares
6,878
12
Car
1,500
13
Cemetery burial plot
4,500
14
Boat & trailer
3,000
15
(Alleged add-back)
nil
32
1,004 shares in N Bank
1,000
Sub-total
1,390,493
1,390,493
Liabilities
25
Suburb C council rates (50 per cent)
3,335
26
CBA visacard
4,345
Sub-total
7,680
7,680
Net assets
1,382,813
Superannuation
28
Superannuation
979,081
979,081
Total
2,361,894
The wife’s existing assets, liabilities, and superannuation interests comprise:
No.
Assets
Value
Total
1
Former matrimonial home at Suburb C (50 per cent)
1,100,000
2
Holiday home at D Town (50 per cent)
270,000
3
(omitted)
nil
4
CBA acc #...73
32
5
CBA acc #...11
1,101
6
P Bank acc #...41
2,856
7
1 C class share in family corporation
1
8
(omitted)
nil
9
Car
13,300
16
(Alleged add-back)
nil
17
Partial add-back of insurance payment
30,474
Sub-total
1,417,764
1,417,764
Liabilities
18
Mortgage to Q Pty Ltd
108,428
19
CBA loan
46,623
20
CBA mastercard
2,586
21
CBA overdraft
2,000
22
Westpac visacard
6,446
23
P Bank visacard
12,141
24
(omitted)
nil
25
Suburb C council rates (50 per cent)
3,335
Sub-total
181,559
181,559
Net assets
1,236,205
Superannuation
27
Superannuation
37,352
37,352
Total
1,273,557
Some of the items within the amended balance sheet remained controversial, so the above findings require the following explanations.
Item 15
The wife contended that, as at February 2012, the husband had about $40,000 in his bank account[6] and, by April 2013, he had a balance of about $70,000 in the account.[7] On 19 April 2013, the husband withdrew $50,000 from the account and has not since explained to the wife what he did with those funds.[8] Over the following year, to April 2014, the husband exhausted the credit balance of the account and the account was closed.[9]
[6] Wife’s affidavit, para 72
[7] Wife’s affidavit, Annexure A
[8] Wife’s affidavit, para 73, Annexure A
[9] Wife’s affidavit, para 74, Annexure A
The husband gave no evidence-in-chief about the use to which he put those funds, but he asserted in cross-examination he used the $50,000 to repay the residual balance of the loan of $100,000 he owed to his father from September 2003.[10] A copy of the cheque was tendered in evidence.[11]
[10] Husband’s affidavit, para 84
[11] Exhibit W1
Although the husband’s evidence in cross-examination about the manner in which the loan was repaid to his father was arguably inconsistent in some respects, most likely, part of the loan (not the whole of the loan) was repaid in or about 2007 and the remaining balance of $50,000 was repaid by the cheque in 2013. It was open to the wife to contradict that construction of the facts by demonstrating, by reference to bank statements, the earlier periodic repayments to the husband’s father exceeded the other one-half of the loan, but she did not do so. Acceptance of that probable explanation forecloses the wife’s argument for the sum of $50,000 to be notionally added back as an asset of the husband. Her alternate theory about how the husband spent the money in some other unexplained way relied upon intricate inferences rather than direct evidence and they are not accepted.
Item 16
It was common ground the wife’s parents advanced the sum of $250,000 to the parties in either 2006 or 2007.[12] The wife contended the advance was characterised as a loan[13] and, while the husband asserted it was a gift,[14] even on his version it was not an unconditional gift. He admitted he agreed to return any of the money on request by the wife’s parents at any time.[15] No factual finding need be made as to whether it was a loan or a conditional gift. Indeed, neither party sought any finding. The financial accommodation was given and they benefitted from it. They agreed an amount not exceeding $165,000[16] (but perhaps $164,000[17] or $163,650[18]) was repaid, meaning at least $85,000 was never repaid.[19] The residual balance was applied by the parties to reduce their home loan, saving them a considerable amount of interest on loan repayments.
[12] Husband’s affidavit, paras 42, 104; Wife’s affidavit, para 37
[13] Wife’s affidavit, paras 37-39
[14] Husband’s affidavit, paras 42, 100
[15] Husband’s affidavit, para 105
[16] Wife’s affidavit, para 40
[17] Husband’s affidavit, para 42
[18] Husband’s affidavit, para 110
[19] Wife’s affidavit, para 99 (page 22)
In any event, of the approximate amount of $165,000 repaid, it included repayments totalling $75,000 which were withdrawn from the parties banking accounts in the period between February 2009 and December 2010.[20] The husband wanted the sum of $75,000 notionally added back as an asset of the wife.
[20] Husband’s affidavit, paras 110(c), 113, 114; Wife’s affidavit, paras 75-77
The husband confirmed in cross-examination how the total of $75,000 comprised a single payment of $50,000, allegedly paid in satisfaction of a taxation debt due by the wife’s father or the corporation he controlled.[21] The husband admitted the wife showed him an official letter at the time to verify the quantum of the tax payable.[22] While he might still have doubted the withdrawal of $50,000 was ever actually paid to the wife’s father, his corporation, or to the ATO on his or its behalf, his aggravation about the wife’s alleged deception was misplaced. The husband admitted in cross-examination the wife’s alleged deception over the $50,000 was “the reason we are here [at court] today”, which, if true, was astounding vindication of how the parties’ contest of this litigation for more than three years disproportionately wasted their time and money.
[21] Husband’s affidavit, paras 115-117, 119
[22] Husband’s affidavit, para 115
The husband busied himself to prove the sum of $50,000 was not paid to the ATO,[23] but his evidence only proved the ATO did not receive any tax payment of $50,000 from the wife’s father’s corporation. It did not preclude the possibility that the wife’s father used the money to pay his personal tax. The wife said in cross-examination she did not know whether the tax was due by her father or his corporation. The husband admits referring to the wife as “stupid” and a “dum woman [sic]”,[24] so he must accept the plausibility of her not appreciating the technical difference between, on the one hand, a tax debt due by an individual and, on the other, a tax debt due by a corporation controlled by the individual. The attempts by the husband’s counsel to educate the wife during her cross-examination about the difference between individuals and corporate alter egos did not retrospectively cure her misunderstanding.
[23] Husband’s affidavit, paras 118, 121, Annexure T
[24] Wife’s affidavit, paras 148, 155, Annexure S
In any event, it did not matter. If the wife’s parents wanted the $50,000 repaid to them, it had to be repaid, regardless of how they wanted to then spend it. According to the husband, that was their agreement. He knew the money was repayable on demand and he felt honour-bound to do so.[25] The husband’s complaint involved an assumption, though never expressly articulated, that the wife kept the money and spent it herself, but that was idle speculation.
[25] Husband’s affidavit, paras 108-109
The wife gave direct evidence that the monies were repaid to her parents. The husband was critical of her for not producing documents to corroborate what happened to the whole of the $75,000,[26] but the criticism was unwarranted. Both parties had an obligation of disclosure and, since it was common ground the repayments made to the wife’s parents originated from the parties’ joint account, both had equal power to acquire from the bank the account statements, documentary evidence of how the withdrawals were made, and, if deposited to another account by cheque or electronic transfer, the eventual destination of the withdrawals. The equality of the husband’s power to procure such documentary evidence was exemplified when he was confronted in cross-examination with copies of cheques, payable to the wife’s parents and drawn on the parties’ joint account, which were written and signed by him.
[26] Husband’s affidavit, paras 120, 122
Whether some of the $165,000 repaid to the wife’s parents was used by them to pay a discrete taxation liability of $50,000 was beside the point. The parties’ agreement that they only repaid a portion of the financial accommodation of $250,000 granted to them by the wife’s parents was the significant feature of the evidence. There was no proper basis upon which to justify the $75,000 being added back as the wife’s asset.
Item 17
In October 2014, storms caused flooding and damage to personal property stored at the former matrimonial home. Each party was paid $23,884 in respect of the damage to items of personal property,[27] but the wife was paid an extra $60,948 in respect of damage to the house.[28] The husband wanted that sum notionally added back as an asset of the wife.
[27] Husband’s affidavit, para 164, Annexure JJ; Wife’s affidavit, para 85
[28] Husband’s affidavit, para 165, Annexure KK; Wife’s affidavit, para 86
The husband alleged the wife did not inform him how that compensation was spent,[29] but she deposed to her expenditure of it in her affidavit. She used it to repay a personal loan, buy household goods, pay for part of the costs of their eldest son’s wedding, and to meet household expenditure.[30] None of it was spent on repairs to the house, even though the parties jointly owned the real property and it was paid for their joint benefit. While none of the money was squandered, the wife spent it all for her own benefit. The husband’s one-half share of the insurance payment is therefore added-back as the wife’s notional asset, effectively as a premature distribution (see Omacini v Omacini (2005) 33 Fam LR 134 at 144-145).
[29] Husband’s affidavit, paras 166-167
[30] Wife’s affidavit, para 86
Item 18
In July 2017, the wife obtained a loan, which she secured by mortgage registered in favour of the creditor over real property at Suburb R, NSW. The Suburb R property forms part of the wife’s bequest from her deceased mother’s estate, but the property was transmitted to her at about the time she took the loan. Although the loan is secured over an asset she received as a bequest, the loan is unrelated to the bequest.
The husband submitted for the debt to not be counted among the wife’s liabilities, but it will be. She took out the loan to pay debts and meet other personal expenses. Her liability under the loan is certain and it offsets the value of her assets. If she defaults, while the creditor might more easily execute its security over the Suburb R property, the wife’s other assets are amenable to writs of execution to meet the liability.
Although the wife has drawn down $278,658 under the line of credit, she conceded that $170,230 of that sum was used to pay some of her legal costs and disbursements in these proceedings. The parties’ legal costs are excluded from their liabilities as part of the adjustment exercise (see Chorn v Hopkins (2004) FLC 93-204 at [55]-[59]), so only the lesser amount of $108,428 is taken into account, consistently with the husband’s submission.
Items 19, 20, 21, 22, 23, 25 & 26
These items are existing individual or joint debts, in respect of which the parties’ liability is certain, and so they are counted among their liabilities.
The husband submitted for the debts to be ignored as part of the assessment exercise under s 79 of the Act and for them to only be taken into account in the adjustment exercise under s 75(2) of the Act, because they were mainly created after the parties’ separation, but the submission is rejected. Parties often create new liabilities after separation because their financial needs expand when their income and assets are required to support two households instead of only one. They are entitled to get on with their lives and have their entitlements assessed at trial by reference to their real assets and debts (see Chorn & Hopkins (2004) at [24]; Cerini & Cerini [1998] FamCA 143 at [46]).
Item 32
This item was omitted from the balance sheet tendered by the parties, but they conceded its inclusion in final submissions. The husband conceded in cross-examination that he owned 1,004 shares in the N bank. He said each share was worth Euro€0.669, so he estimated the overall value of the shareholding at AUD$1,000.
Financial resources (items 3, 8, 24 & 29)
The wife’s parents had reciprocal wills. The wife’s father died in 2012 and the whole of his estate passed to the wife’s mother. The wife’s mother then died in 2013, but the estate is still not yet administered. The wife and her two brothers are the estate beneficiaries. The wife is the executrix of the estate, but its timely administration has been thwarted by numerous complications.
For reasons yet to be addressed, the wife is stressed, anxious, and depressed. Her labile emotional condition was not conducive to her prompt attention to the estate administration. She did not instruct her solicitor to act in the succession until December 2013, by which time an estate creditor had already commenced action for administration of the estate. The solicitor was unable to find the deceased’s will until April 2014 and so the application for the grant of probate was not made until October 2014. The provisions of the will were poorly drawn, because the deceased purported to bequeath a business owned by a family corporation, not by her. She was only a shareholder in the corporation, which was the legal proprietor of the business, and she could only therefore bequeath her shares in the corporation. The existence of the corporation only came to the attention of the solicitor because a title search against a real property believed to be owned by the deceased revealed it to be owned by the corporation. By then, the corporation was already de-registered for failure to file its annual returns and it needed to be re-registered. An issue arose about whether the corporation’s discharge of a debt, secured over an asset of the estate, created a liability due to the corporation exclusively by the wife (as the sole beneficiary of the asset which had secured the debt) or by all three beneficiaries equally (as the beneficiaries of the residual estate). That dispute was tentatively resolved in only the week before the trial. Additionally, one of the wife’s brothers suggested he would challenge the will and, although that did not eventuate, he still filed a complaint against the probate solicitor with the NSW Legal Services Commissioner. The complaint was eventually dismissed, but it added to the delay.
The husband contended, inferentially if not expressly, that the finalisation of the estate’s administration and the wife’s extraction of her bequest from it was deliberately delayed as a ploy to avoid the crystallisation of her beneficial interest prior to the completion of these proceedings, but the evidence failed to vindicate the husband’s belief to that effect. Both parties were keen to have these proceedings resolved as quickly as possible once they were transferred from the Federal Circuit Court. Neither party suggested the trial should be deferred until the administration of the wife’s deceased mother’s estate was complete, so the husband can hardly complain about the delayed administration and the reasons for it. He could have applied for an adjournment of the trial once he learned that completion of the administration was imminent, to enable the wife’s interest in the estate to crystallise from financial resource into actual property, but he chose not to do so.
Under the deceased’s will, the wife will receive sole title to a real property at Suburb R, NSW and a proportion of the residue estate.[31] The probate solicitor said the wife will take the Suburb R property encumbered by a debt, which opinion he satisfactorily explained in evidence and said was corroborated by chartered accountants’ advice. His opinion is accepted as correct on the balance of probabilities, despite the stridency of his cross-examination by the husband and the vociferous argument in final submissions. His mere concession, during cross-examination, of bare possibilities that might affect the reliability of his opinion did not undermine the probable correctness of his opinion.
[31] Husband’s affidavit, para 140
The probate solicitor explained there will be no residual estate of any realisable value after the transmission of the specific bequests of real property to the beneficiaries. The residual estate comprises shares in the family corporation, but the corporation’s only assets are choses in action, which debts are probably irrecoverable. The shares are therefore effectively worthless. The corporation will be liquidated.[32]
[32] Exhibit W2
For those reasons, most probably, the wife’s overall interest in the deceased estate comprises the Suburb R property worth $1,350,000 (item 3), encumbered by a debt of $273,380 (item 24), together with some extra shares in the family corporation which have no tangible value (item 8). Those items collectively comprise another item separately listed on the balance sheet (item 29), which the parties agreed should be treated as a financial resource rather than as crystallised property, so they are omitted from the schedule of property interests (see Bonnici & Bonnici (1992) FLC 92-272; Bishop & Bishop (2013) FLC 93-553 at [28]-[29]).
The wife correctly submitted it was unnecessary to precisely calculate the value of the resource, which made the debate about the existence and quantum of the debt (item 24) much less important than the husband seemed to think. As a raw figure, a debt of $273,380 is substantial, but the overall net value of the wife’s beneficial interest in the deceased estate was merely one of several features of the evidence which influence the decision about the percentage adjustment applied to the parties under s 75(2) of the Act.
The husband deposed to the ways in which he believes he contributed indirectly to the wife’s receipt of the inheritance, but he made no submission to that effect. As the wife contended, there was no connection between his personal effort and the deceased’s testamentary generosity. The deceased bequeathed her property to her children, of whom the wife is one.
Financial resources (items 30 & 31)
The husband has worked for the same employer for many years and has accrued long service leave worth $79,801 and recreational leave worth $8,686. He said in cross-examination he intends to use his leave during the course of his employment, rather than retire with the accrued benefits and receive lump sum payouts, but his intention may change. The current values of those entitlements are therefore taken into account as financial resources. Neither party contended the resources should be characterised as property and so they are omitted from the schedule of property interests.
Section 79(2)
The parties each considered it would be just and equitable to alter their property interests, since they each sought adjustment orders under s 79 of the Act. Such adjustment orders are warranted, not least because their joint proprietary interests in two real properties need to be severed and their existing individual property interests do not fairly reflect their respective financial and non-financial contributions to the overall property and superannuation.
Sections 79(4) & 75(2)
Initial contributions
At the time of the parties’ marriage, their assets were modest. The wife had some items of personal property and savings of about $10,000,[33] whereas the husband owned a car, had some accumulated superannuation entitlements, and savings of about $4,000, which he spent on the parties’ honeymoon.[34] There was nothing to usefully differentiate their initial contributions.
[33] Wife’s affidavit, para 8; Husband’s affidavit, para 31
[34] Wife’s affidavit, para 9; Husband’s affidavit, para 30
Contributions during cohabitation
Both parties worked hard for the family’s financial and emotional advancement during the marriage. Their contributions in that regard were equivalent.
Despite the husband’s apparent reluctance to accept it, the wife was the primary homemaker and carer for the children.[35] She also worked on a part-time basis throughout the marriage and she utilised her income for the benefit of the family.[36] Although the husband professed his doubt she did so, he conceded in cross-examination he did not know how the wife expended the money she deposited into her account. His doubts and lack of knowledge were not probative. While the wife disavowed that the daily help she provided to her parents impinged upon the time she devoted to the family household,[37] most likely it did to some limited extent.
[35] Wife’s affidavit, paras 57-65
[36] Wife’s affidavit, paras 44, 47, 70; Husband’s affidavit, paras 33-35
[37] Wife’s affidavit, para 67
The husband was the primary breadwinner, but he maintained the family home and helped with household chores and with the care of the children.[38] He probably exaggerated the extent of his non-financial domestic contributions a little,[39] though he probably did expand his domestic role with the youngest child prior to the two of them departing the family home in June 2014.[40]
[38] Wife’s affidavit, para 55
[39] Husband’s affidavit, paras 46-57
[40] Husband’s affidavit, para 58
The wife defrauded Centrelink of nearly $52,000 between 2004 and 2009, which money was ultimately recovered. While the fraud was perpetrated by the wife alone, the husband admitted he was forewarned and aware of it.[41] He did nothing to stop her and he did not report her criminality, so his concealment feasibly amounted to an offence itself (s 316 of the Crimes Act 1900 (NSW)). Averaged over five years, the amount received by the wife approximated $200 per week. There was no suggestion she squandered the money, such as on some addiction or other personal pursuit. Most probably, she spent the money for the benefit of the household. The parties’ joint efforts ensured its repayment. The sum was repaid from the parties’ joint account, into which the husband’s wages were deposited, but the wife also said in cross-examination she contributed her income to the repayments, which evidence is accepted.
[41] Husband’s affidavit, paras 123-128
The husband deposed the debt repaid to Centrelink comprised part of the $165,000 repaid to the wife’s parents,[42] but that evidence is rejected because it was inconsistent with other evidence he gave in cross-examination. Most probably, the parties’ repayment of the Centrelink debt and the repayment of $165,000 to the wife’s parents were quite separate.
[42] Husband’s affidavit, para 110(a)
Contributions from paternal and maternal family members
The parties benefitted from financial assistance given to them by the maternal family. Early in the marriage, the wife’s mother gave her $12,000, which money was used to improve a real property the parties owned.[43] The parties were also able to purchase hardware for their holiday home at discounted cost from the wife’s father.[44] In 2006, the wife’s parents gave the parties $250,000,[45] of which some $165,000 was repaid. The parties therefore experienced the windfall of $85,000, which they used to diminish their mortgage.
[43] Wife’s affidavit, para 14
[44] Wife’s affidavit, para 20
[45] Wife’s affidavit, para 37
The maternal family also helped the parties in other ways. They laboured to help build the parties’ holiday home,[46] though the husband also laboured for them in return.[47] The wife’s parents also helped to care for the children.[48]
[46] Wife’s affidavit, para 21
[47] Husband’s affidavit, paras 63, 65
[48] Wife’s affidavit, para 51
The husband deposed how, in 1998, his parents gave the parties $20,000 to use towards the purchase of real property, together with some other smaller sums from time to time.[49] Although the husband was forced to concede he omitted mentioning his parents’ gift of $20,000 in an earlier affidavit he filed in the proceedings, he explained that was an oversight. The wife asserted it was a recent fabrication, but that was just suspicious speculation. The amounts concerned were so modest and too antiquated to justify their fabrication. Most probably, the parties did receive such gifts of money.
[49] Husband’s affidavit, paras 39, 76
The husband’s relatives also loaned the parties sums totalling $370,000 in 2003 and 2006, but those amounts were repaid in full, albeit without interest.[50] The interest saving was not quantified, but both the loans and the interest saving helped the parties.
[50] Husband’s affidavit, paras 84-86; Wife’s affidavit, paras 34-35
Post-separation contributions
After the husband and youngest child vacated the family home in June 2014, the husband was solely responsible for his care.[51] The wife would prefer to spend time with the youngest child and take on some responsibility for his care but, to her sincere disappointment, they remain estranged.
[51] Husband’s affidavit, para 59
The wife has always paid the assessed child support to the husband in respect of the youngest child.
Otherwise, save in respect of the husband’s superannuation interest, after they ceased to live within the same household in June 2014, neither party professed making any contribution which merited attention in the adjustment process.
Superannuation
Despite orthodox treatment of the parties’ superannuation interests separately from their property interests (see Marriage of Coghlan (2005) 33 Fam LR 414 at 428-429), both parties urged the Court to treat their superannuation interests as property and to assess their contributions to the growth of their superannuation interests as an integral part of the comparative assessment of their contributions to the acquisition, conservation and improvement of property. That approach is adopted.
In November 2013, when the husband contended the parties finally separated, his superannuation interest was valued at $556,558.[52] Now, only four years later, it is valued at $979,081.[53] The husband contended the wife made no contribution at all to his accumulation of the differential, amounting to some $400,000 extra superannuation over the last four years, which argument the wife strenuously refuted.
[52] Husband’s affidavit, paras 148-149, Annexure BB
[53] Exhibit J2
The husband’s superannuation interest is a defined benefit interest. The quantum of the defined benefit is calculated in the manner explained in an information sheet published by the fund trustee.[54] In essence, the calculation is influenced by two variables: the member’s “final average salary” and a “multiple”, which two variables are multiplied to compute the value of the interest. The “final average salary” is based on the member’s annual salary over the preceding three years. The rate of the “multiple” depends on the member’s length of service and the percentage value of the member’s superannuation contributions.
[54] Exhibit H1
The parties have now been separated for over four years, so the calculation of the husband’s “final average salary” no longer depends upon the value of his salary during the parties’ cohabitation. Apparently, his salary is now about $15,000 gross more than it was when the parties separated. There was no evidence the husband changed his percentage rate of superannuation contributions over the last four years and it is unlikely there would have been any increase because, since the parties’ separation, their income has been spread more thinly by reason of the need to support separate households and to pay the legal costs of this litigation. Importantly, the husband has enjoyed continuous employment with his employer since 1982[55] so, over the past four years, his length of service has increased from about 31 years to about 35 years.
[55] Husband’s affidavit, paras 30(a), 33
Those features of the evidence necessarily mean the wife indirectly contributed to the current value of the husband’s superannuation interest in a substantial way, which warrants substantial rather than token recognition. The husband’s “final average salary” would certainly now be modestly more than it was when the parties separated only a few years ago, but the superannuation contributions made from his salary over the last few years were probably no larger than those he made during the parties’ cohabitation, and the wife contributed to the husband’s accrual of a “multiple” for 31 of 35 years.
Application of Kennon principles
The wife contended her contributions were significantly more arduous and attracted greater weight because of the oppressive domestic conditions created by the husband’s violence and hostility (see Marriage of Kennon (1997) 22 Fam LR 1). She began the trial forecasting the factual premise for the Kennon submission would warrant an adjustment in her favour of up to five per cent, but she concluded the trial admitting the adjustment would be less than two per cent, which capitulation was a reflection of how the evidence she advanced to support the argument was eroded.
The wife deposed to past events which she believes contributed to her current emotional instability,[56] but much of the evidence was couched in terms of her perception and opinion, rather than her recitation of asserted facts and circumstances, which made her evidence more difficult to test. The husband adduced evidence in rebuttal,[57] which he attempted to give in more factual terms, but he still made admissions about some aspects of his past conduct which coincided with the wife’s evidence.
[56] Wife’s affidavit, paras 134-200, 207-218, 241-245
[57] Husband’s affidavit, paras 197-254
In some respects, the parties’ evidence about some past violent confrontations between them was irreconcilable and, although both were tested under cross-examination, neither appeared inherently more credible than the other. The husband submitted the wife’s veracity was impeached for several reasons, which made her evidence unreliable in all respects, so his evidence should be preferred whenever there was inconsistency between them. That submission is rejected as too simplistic and one-dimensional. Impeachment of a party’s credit on one issue does not necessarily impeach the party’s credit on all issues. The Court is at liberty to accept all, some, or none of the evidence given by a witness (see Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 at 155; McPhee v S Bennett Ltd (1934) 52 WN (NSW) 8 at 9).
In some respects, the wife was credible. For example, her teary demeanour, which transformed into quiet sobbing, when she was challenged about a particular incident in 2012 was compellingly persuasive. It was a memorable incident for both parties. The husband did not deny that, on that occasion, a tuft of hair was torn from the wife’s scalp, though he said he must have done it inadvertently rather than intentionally.[58] The wife made a contemporaneous complaint about the incident to her friend, Ms J, who gave evidence of it.[59] Although Ms J dislikes the husband, that was no reason to reject her evidence about the incident as untruthful. The wife confirmed, both in evidence-in-chief[60] and in cross-examination, she still has the clump of hair at home. Her psychologist said in cross-examination the wife had shown it to her.
[58] Husband’s affidavit, para 205
[59] Affidavit of Ms J, paras 15-17
[60] Wife’s affidavit, para 187
The evidence did not permit any firm conclusion that one party’s evidence should be preferred to the other party’s in every instance of controversy about their past hostility. Undoubtedly, their relationship was fractious, particularly over its last few years. Most likely, the parties’ individual recollections of past incidents have moulded to coincide with their perceptions about how the other party was most to blame. The wife’s version of the husband’s conduct seemed exaggerated to some extent and, conversely, the husband’s version of his conduct appeared trivialised.
In reaching conclusions about the Kennon submission, it is safest to rely upon evidence which is reasonably uncontroversial. To that end, the following observations may be fairly made:
(a)The husband did adopt a more dominant role in the family household. The parties’ two adult sons are now estranged from him and the one son who gave evidence attributes that to his perception of the husband’s overbearing treatment of him and his observations of the husband’s overbearing treatment of the wife.
(b)There were occasional episodes of physical violence between the parties and, while each attributes blame to the other for that, it is understandable why the wife is fearful of the husband. He is physically stronger. They both reacted angrily or intemperately to one another on occasions, as some of the mother’s text messages to the husband reveal.[61]
(c)While the wife made generalised complaints about the husband’s oppressive behaviour “during the marriage”, she told her psychologist the marriage only started to deteriorate in 2009.[62] The incidents she was able to particularise and describe with greater specificity occurred in the confined period between 2011 and 2014. The parties were married for about 30 years and that discrete period of three years coincided with the deterioration of the marriage. The wife believed the marital separation occurred in February 2012, the husband believed the marital separation occurred in November 2013, and it was common ground they ceased to jointly occupy the family home by June 2014. The guideline judgment in Kennon expressly recognised exclusion from consideration of conduct related to the breakdown of the parties’ marriage (see Kennon at 24).
(d)Although one party’s conduct may still feasibly render the other party’s contributions more arduous, even after separation (see Baranski & Baranski [2012] FamCAFC 18 at [257]-[259]), that submission was not available to the wife in these proceedings. Once the husband and the youngest child vacated the family home in June 2014, it was not contended the wife thereafter made any non-financial contribution that merits recognition in these proceedings. She had very little, if any, contact with the youngest child, for whom the husband remained almost exclusively responsible. The two older children, who remained living with the wife, were adults.
(e)There could be little doubt the wife suffers from anxiety and depression and, almost certainly, her psychological sequelae are at least partially attributable to her dissatisfaction with the marriage and what occurred within it. But, most probably, that is not the only reason for it. According to her doctor, she was not diagnosed with “reactive depression” until 2011 and her physical appearance has continued to progressively worsen from 2013 to date,[63] even though she has had little or nothing to do with the husband since 2014.
(f)The wife experienced other significant stressors in her life: she suffers ill health (including diabetes, hypertension, and vascular disease);[64] she was very distressed by the death of her parents in 2012 and 2013, to whom she was close; she has been in dispute with at least one sibling over the resolution of her late mother’s deceased estate; she lamented the loss of the marriage, which she reported to her psychologist she desired to maintain;[65] she is estranged from her youngest son, which she regrets terribly, and was the main reason for her anxiety when she first consulted her psychologist between 2011 and 2014;[66] her doctor admitted she worried about one adult son’s gambling; and she was gravely stressed by this litigation, which has exacted a high emotional and financial toll, as confirmed by her doctor.
(g)In 2014, the wife’s psychologist concluded, in reliance upon only the history related to her by the wife, that her condition and symptoms were “situational”, related to the breakdown of the marriage and episodes of abuse, compounded by separation from the youngest child.[67] In 2017, the wife’s psychologist considered that a “key aspect” of the wife’s case was managing her separation from the youngest son.[68] The wife told her psychologist that her psychological and physical health declined since her separation from the youngest child.[69]
(h)The wife’s doctor and psychologist both considered she might not be able to emotionally withstand the rigours of cross-examination at trial, but she did so, despite some concerted pressure over a protracted period. They were both impelled to concede in cross-examination that she might be more resilient than they previously thought. Without discounting the seriousness of the mother’s condition and symptoms, they are episodic not relentless. She does experience some respite and joyous occasions with friends, as photographs depicted,[70] though she was resistant to admit it.
(i)The wife conceded in cross-examination that she never sought a family violence order against the husband, she never sought an injunction for her exclusive occupation of the family home, she sought out marriage counselling to try and save the marriage, and she wanted the family to stay together. The parties socialised together intermittently in 2012 and 2013 and, up until the husband elected to vacate the family home in June 2014, the parties slept in the same bed and ate most evening meals together.
[61] Exhibits H6, H7
[62] First affidavit of Ms K
[63] Affidavit of Dr L
[64] Affidavit of Dr L
[65] First affidavit of Ms K
[66] First affidavit of Ms K
[67] First affidavit of Ms K
[68] Second affidavit of Ms K
[69] Second affidavit of Ms K
[70] Exhibit H8; Affidavit of Ms J, para 46
The evidence therefore demonstrated that the parties’ hostility was mutual in some instances and was largely confined to the period when their marriage was disintegrating. Additionally, the wife’s psychological symptoms are attributable to a variety of causes besides her perceived disrespectful treatment by the husband. The evidentiary foundation for the wife’s Kennon submission was, therefore, insufficiently strong.
Future needs
The parties are similar ages, but their futures look quite different.
The husband is in long-term, full-time employment, for which he is now paid about $141,000 gross per annum. He must be a reliable and valuable employee to have been retained by his employer for the past 35 years. He said in cross-examination he was eligible to retire at age 58 years (some five years hence), but he presently expects that he will work until 65 years of age. His superannuation is currently worth $979,081 and will continue to escalate over the remaining years of his employment. He also has his accrued leave, valued at about $88,000, which he can either use as leave so as to extend his employment longevity or take as cash upon his retirement.
The parties’ youngest child is now 16 years of age. The husband is exclusively responsible for his care and supervision and, allowing for very modest assessed child support paid by the wife,[71] primarily responsible for his financial support.
[71] Husband’s affidavit, para 177
The wife is still able to maintain her long-term, part-time employment in retail services,[72] but that is likely to become increasingly difficult for her, despite the husband’s unrealistic expectation she could even work full-time until her ordinary retirement age.[73] She genuinely wonders how long she can continue to work even part-time.[74] She suffers considerable ill-health, given the multiple physical and psychological conditions with which she is diagnosed.[75] Recently, on medical grounds, she was given special dispensation to access her meagre superannuation so she could buy a cheap car.[76]
[72] Wife’s affidavit, para 115
[73] Husband’s affidavit, para 181
[74] Wife’s affidavit, paras 116, 254, 255
[75] Affidavits of Dr L and Ms K; Wife’s affidavit, paras 88-107
[76] Wife’s affidavit, para 82
The wife’s current part-time income is about $28,000 gross per annum and her rental income from the Suburb R property is about $23,000 gross per annum. Her total gross annual income of about $51,000 is little more than one-third of the husband’s gross annual income of about $141,000. That income-earning disparity will endure whilst ever they remain employed and the gap will only widen if the wife is unable to sustain her employment because of her ill-health.
The wife’s superannuation interest of $37,352 is small by comparison with the husband’s, but her recent inheritance of the Suburb R property, which is worth $1,350,000 gross (subject to its encumbrance of $273,380) and generates weekly rental income of $440, is, in effect, her superannuation.
Conclusion
The husband submitted for his entitlement to 70 per cent of the parties’ property and superannuation. He asserted the parties’ respective contributions under ss 79(4)(a)-(c) of the Act entitled him to 55 per cent, but their respective future needs under ss 79(4)(d)-(g) of the Act entitled him to an adjustment of 15 per cent. The two features which he contended principally accounted for the asserted adjustment were his continuing care for the youngest child and the size of the wife’s imminent inheritance from her mother’s deceased estate.
Conversely, the wife submitted for her entitlement to 55 per cent of the parties’ property and superannuation, because her contributions were modestly greater. She contended there should be no adjustment on account of their future needs.
Until the husband ceased living in the family home in June 2014, the parties’ overall financial and non-financial contributions were broadly equivalent. They each worked as hard as the other, albeit that their efforts were concentrated on different aspects of their family life. The financial accommodation granted to the parties by the maternal family exceeded that given to them by the paternal family, which favours the wife (see Kessey & Kessey (1994) FLC 92-495), but that advantage is offset by the husband’s more significant contributions to the sharp increase in the value of his superannuation interest since separation. The husband’s proportional entitlement by reference to the factors prescribed by ss 79(4)(a)-(c) of the Act is quantified at 52.5 per cent.
By comparison with the wife, the husband has significantly better health and a far superior earning capacity, which he intends to exercise for the next eight years or so. Notional allowance for each party to have the same basal annual gross income of $51,000 would mean the husband will have surplus annual income of $90,000 which, over the next eight years, will amount to not less than about $720,000. The differential could be significantly greater if the wife is unable to sustain her current employment. Of course, over the next two years, the husband will have the financial and non-financial responsibility for the parties’ youngest child until he attains his majority.
The husband’s large superannuation interest has been treated as property and must not be double-counted as a future resource. Nonetheless, the much greater income he will likely earn over the remainder of his working life largely offsets the net value of the wife’s interest in the Suburb R property, which equates to about $1,077,000. The husband should therefore have an adjustment of four per cent in his favour by reference to the factors prescribed by ss 79(4)(d)-(g) of the Act. The four per cent adjustment will open up an extra eight per cent differential between the parties, which is worth about $290,000. That cash sum, added to his superior future income and accumulated leave, achieves approximate equivalence between the parties’ ability to meet their future needs.
The parties’ entitlements are therefore quantified at 56.5 per cent to the husband (which is equivalent to $2,054,030) and 43.5 per cent to the wife (which is equivalent to $1,581,421).
Orders
The parties disagreed over who should retain the family home, which the wife has continued to occupy since the parties’ separation. She always wanted to retain it and the husband only recently proposed the property be transferred to him instead.[77] When he filed his Reply in July 2014, he proposed that the property be sold. His position did not change until he foreshadowed his proposal for different orders just before trial. The husband wants to have the parties’ holiday home as well, of which he has had almost exclusive possession since separation, and the wife is content to relinquish it to him. Subject to the wife’s capacity to buy-out the husband’s interest in the family home within a relatively short time frame, it is just and equitable for her to have it and for the husband to have the holiday home.
[77] Exhibit H13, Order 3
If the wife is to keep the family home, she will have assets worth $2,247,764 (items 1, 4-7, 9, 17) and superannuation of $37,352 (item 27), but debts of $184,894 (items 18-23, 25), the net value of which is $2,100,222. That is $518,801 more than her entitlement.
If she pays that sum in cash to the husband, he will have cash of $518,801, assets worth $560,493 (items 2, 10-14, 32), and superannuation of $979,081 (item 28), but a debt of $4,345 (item 26), the net value of which is $2,054,030, which equals his entitlement of 56.5 per cent.
The wife would be left with 43.5 per cent, but she would then carry the debt of her current mortgage of $108,428 (item 18), the debt of $273,380 which will encumber the Suburb R property, and the debt of $518,801 she will need to raise to pay out the husband. She said in cross-examination she expects she will be able to meet financial obligations of that magnitude with help from her adult sons and the maternal family.
There is no need to split the husband’s superannuation interest, as he proposed.[78] The Suburb R property will superannuate the wife. A large proportion of the husband’s entitlement will therefore comprise superannuation but, should he desire to purchase his own home in Sydney, he will still have cash paid by the wife or from sale of the former matrimonial home and the holiday home to liquidate (collectively worth nearly $1,060,000), together with his income stream which is quite sufficient to support a reasonable home loan.
[78] Exhibit H13, Orders 6-9
The orders therefore provide for the following just and equitable result:
(a)The wife to have the family home, subject to her payment of $518,801 to the husband, in default of which the property will need to be sold and the net proceeds of sale used to achieve a comparable outcome. That would necessitate a cash payment of $1,278,433 to the wife and the division of the residue in proportional shares. The wife will have two months within which to marshal her financial affairs to payout the husband.
(b)The husband to have the holiday home.
(c)The parties to retain the personal property in their possession.
(d)The parties to retain their own superannuation interests.
Costs
Civil litigation in other superior courts of record must be conducted by the cardinal principal that it be as quick, inexpensive, and efficient as reasonably possible (see Part VB of the Federal Court Act 1976 (Cth); Part 6 Division 1 of the Civil Procedure Act 2005 (NSW)).
Aside from an obligation to ensure proceedings under the Act are conducted without under formality and are not protracted (s 97(3)), there is no statutory counterpart governing the practice and procedure of this Court, though the Rules attempt to fill that gap. The main purpose of the Rules is to ensure that each case is resolved in a just and timely manner at reasonable cost to both the parties and the Court (r 1.04). The ways in which the main purpose should be promoted and achieved are particularised by the Rules (rr 1.06, 1.07), which importantly include attention to proportionality and the saving of cost, the responsibility for compliance with which falls upon both litigants and lawyers (r 1.08). Unfortunately, it seems scant regard was paid to those binding obligations by the parties and the solicitors in these proceedings.
While the parties and their solicitors are not at fault for the proceedings taking three years to pass through the hands of two courts, it was still incumbent upon them to periodically re-assess the viability of their respective claims for relief during that time. Their dispute over parenting orders was ultimately resolved by final orders made with their consent, but not until the first trial in May 2017 before the Federal Circuit Court. Their continuing dispute over property adjustment orders necessitated a second trial before this Court in December 2017. As it transpired, the issues were not unduly complex, though the evidence was plentiful and the cross-examinations fastidious and lengthy.
Rule 19.04 requires solicitors to give their clients written notice of the actual and prospective legal costs and disbursements they have incurred and will likely incur up to and including future Court events. The policy behind the rule is self-evident. It is designed to enable the parties’ evaluation of whether the money they have already spent and the extra money they are likely to continue spending in contesting the litigation is proportionate to the relief they seek.
During the trial, counsel were asked to produce for the Court’s inspection the written notices given to the parties by their instructing solicitors, as r 19.04(3) provides. The notices revealed the parties’ combined expenditure on legal costs was estimated at $719,060, which expenditure may be contextualised by the following observations:
(a)Their net assets were worth $2,619,018, so they spent the equivalent of 27.5 per cent of their assets in the litigation;
(b)Even if their superannuation interests are added in, they still spent the equivalent of 20 per cent of their net assets and superannuation;
(c)Prior to trial, the husband already owned 65 per cent of the parties’ net assets and superannuation. At trial, he sought 70 per cent, so he spent $385,181 trying to obtain the extra five per cent, worth only $181,773. So, even if he succeeded to the fullest extent of his application, he would still have been about $200,000 worse off. Eventually, the husband received 8.5 per cent less than his existing entitlement, so he spent $385,181 to lose $309,013: an overall loss of some $694,000.
(d)Prior to trial, the wife owned 35 per cent of the parties’ net assets and superannuation. At trial, she sought 55 per cent, but only succeeded in obtaining 43.5 per cent, so she spent $333,879 to only acquire an extra 8.5 per cent, worth $309,013. Accordingly, after more than three years of litigation, she spent more than she gained and is now some $24,000 worse off.
It must follow that, particularly in the husband’s case, if he did periodically review whether his expenditure on legal costs was worthwhile during the litigation, he made some ill-conceived decisions.
Of course, parties are free to spend their capital and income on legal costs as they like, but few would wish to do so pointlessly. Lawyers are also obliged to act on instructions – even imprudent instructions given by misguided clients. Not uncommonly though, by reason of parties’ inexperience and unfamiliarity, their instructions are disconnected from the practical reality of their litigious predicament and what might or should be done to remedy it. Trite though it may be, the lawyers’ obligation is to eradicate any misconception and to ensure the instructions upon which they act advance the clients’ legal interests. Inevitably, expenditure on legal costs must be proportionate to the relief reasonably expected from the litigation, because unjustifiable fees corrupt the integrity of the legal system and undermine public confidence in it. Any scandalous waste of money on legal costs causes reputational damage for courts and the legal profession, not just the lawyers to whom the fees are paid.
The husband sought costs against the wife[79] and the wife sought costs against the husband,[80] though the maintenance of those applications will presumably hinge upon the nature of the orders now pronounced. The question of costs will be reserved for 28 days to give the parties and their lawyers time to consider whether the dispute should be prolonged and yet another chapter needs to be written in this litigious story.
[79] Exhibit H13, Order 14
[80] Reply filed 10/5/17, Order 3
I certify that the preceding one hundred (100)) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Austin delivered on 29 January 2018.
Associate
Date: 29 January 2018
Key Legal Topics
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Family Law
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